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So how long can a creditor chase the debt?

A question that I often come across from people struggling to pay their debts is “how long can my creditors chase me?” The answer is until you have paid them what you owe. However, if communication between the debtor and the creditor breaks down and enough time elapses, then the debt can be un-enforceable.

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  • All creditors have a fixed period of time, as stated in the Limitations Act of 1980, in which that they can pursue a debtor for a debt. The act states that unsecured debts, such as credit cards, store cards, overdraft, bank loans and catalogues, become “statute barred” if there has been no contact between the two parties within a six year period. The creditor has not already obtained a judgment against you

and

  • You, or anyone else owing the money (on a debt in joint names) have not made a payment on the debt during the last six years

and

  • You have not communicated with the creditor admitting you owe the debt during the last six years.

After six years if the creditor makes contact with the debtor and asks for a payment, the debtor does not have to pay them.

These instructions do not apply to debts in Scotland. Under Scottish law, if a lender allows time to pass without receiving any payment an action for recovery may become barred under the Prescription and Limitation (Scotland) Act 1973. (For details of this Act see Gloag and Henderson 12th edition at Chapter4.). These debts are completely extinguished and cannot be enforced. Once the prescriptive period expires the debt cannot be allowed as a deduction.

To explain it further here is a possible scenario…

You take out a credit card, after a period of time you lose contact with your credit card provider and stop payments. You then receive a letter from them to say they want you to resume payments and clear the debt. The time period between your last contact with the creditor – whether it was a payment made, a letter or a telephone conversation – has been six years, this means that the debt has become “statue barred” and the creditor is no longer allowed to pursue you for payment or take any further legal action against you.

If a creditor continues to contact you once the debt becomes “statue barred” then you are entitled to report them for harassment, as well as making a complain to the Financial Conduct Authority.

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Can Old Debts be Written Off?

Well, yes and no. After a period of six years after you miss a payment, the default is removed from your credit file and no longer acts negatively against you. The same thing goes with debts; according to The Limitation Act 1980, after a period of six years, if the debtor has not acknowledged the debt through payment or contact, it becomes statute barred. This means that (with the exception of Council Tax bills), the creditor cannot use legal means to enforce you to pay a debt.

The downside is, although a company cannot legally make you give them any money, the debt still exists and they can bother you with as many letters, emails, texts or calls as they like until the debt is paid in full.

It’s also worth noting that if someone takes legal action (such as requesting a CCJ) on you during the six-year window since you last acknowledged the debt, then you are still legally obliged to pay the debt and it will not become statute barred. If the debt in question is related to a mortgage, then the time-limit doubles and you require 12 contactless years before any statute barring.

What Happens If You Haven’t Contacted A Creditor?

Well the first thing that usually happens if you haven’t been in contact with a company you owe money to, is they’ll pass your debt onto a collection agency. If the original creditor cannot get in touch with a debtor it is not uncommon for them to outsource the collection of the debt to someone else. As those who have dealt with them will attest, debt collection agencies tend to be much more ‘thorough’ when finding and collecting debt.

If traditional communications fail then it’s possible that your creditor will take a further step of requesting a County Court Judgment (also known as a CCJ). If this is asked for, the courts will decide whether or not you are liable to repay the debt, and set out in detail, the manner in which it has to be repaid. CCJ’s stick to your record and can seriously reduce your chances of getting credit in the future.

But what happens to really old debt – debt that has been ignored for years and seemingly forgotten?

What to do Next?

Even if you are not legally obliged to pay any money once a debt becomes statute barred, you can still get chased for it. Besides, no one sends you a letter in the post telling you that you don’t have to pay them back anymore.

If someone contacts you about a debt that you think might be statute barred, then you can respond by asking the creditor to prove that what you owe is legally enforceable. This can be done with a simple letter in which you should ask for proof that the debt isn’t statute barred (quoting the Limitation Act 1980), and state that you do not acknowledge the debt.

If you receive proof that you have acknowledged the debt within a six year period then it’s time to pay-up. If not, you are theoretically free to leave that debt unpaid forever, and you can even make a complaint to the Financial Ombudsman if the company in question continues to hassle you, without proof of liability.

But, do you really want that hanging over your head? What you can do instead is contact the company and make them an offer. The debt is not legally enforceable but it still exists, meaning that you could have debt collectors calling at your home. Why not make your debtor an offer, starting at around 10% of the total value, and see if you can’t properly get rid of that old debt for a fraction of the price? This is called a debt settlement, and arranging one correctly could see you become debt free very quickly (and cheaply) if done properly. 

If you need help with Statute Barred debt, or would like help arranging a debt settlement, then why not call our helpline team today on 0800 280 2816 for a confidential, no-obligation chat? Our expert debt advisers are available between 8am and 8pm, Monday to Friday, and 9am to 3pm on Saturdays.

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